Envestra confirms FY profit jump forecast

Natural gas distributor Envestra has maintained its guidance for a 33 per cent jump in full year net profit, underpinned by regulatory mandated gas price increases.

The gas distribution network and pipeline company on Thursday reiterated its previous forecast for a net profit of about $60 million for 2011/12, up from $45 million a year earlier.

Managing director John Little said recent regulatory determinations covering its South Australian and Queensland networks, which comprise more than half of its business, resulted in significant tariff increases in both states.

The increases should drive a 55 per cent jump in Envestra's revenues over the next five years compared to the previous five-year period, Mr Little told the company's annual general meeting in Adelaide.

The higher tariffs recognised the increased capital funding costs faced by Envestra following the global financial crisis, as well as the substantial money it needed to replace its ageing assets in coming years to maintain the reliability of its networks, he said.

The company has budgeted $200 million this financial year for expanding its networks and to connect more than 25,000 consumers, as well as continuing its program of replacing old cast iron and steel mains.

Mr Little said long-term revenue growth depended largely on the expansion of the company's network, particularly the development of new housing subdivisions in Victoria and SA, and to a lesser extent in Queensland.

The firm expects average domestic volumes will decline, due to factors including warming weather patterns, but this should not substantially affect its long-term revenue growth due to higher tariffs.

Envestra said it had executed a $235 million syndicated loan agreement with domestic and international banks, with funds earmarked for repaying loans maturing mid-2012.